As a nation with global interests, Australia deals with countries in many regions. The countries which engage Australia's interests most substantially are those which influence the strategic and economic environment. These include the three major powers and largest economies of the Asia-Pacific region - the United States of America, Japan and China - and Australia's neighbour, Indonesia. Australia also has significant relationships with the other states of the Association of South-East Asian Nations (ASEAN), the EU and its member states, the Republic of Korea and, in the South Pacific, New Zealand and Papua New Guinea (PNG).

United States of America

The relationship between Australia and the United States of America is based on a strong commitment to democracy, security and an open trading system. The relationship complements and reinforces Australia's practical commitment to the Asia-Pacific region.

Within the alliance of the ANZUS Treaty, Australia and the United States of America cooperate closely in a range of areas to promote their own security and to contribute to broader regional and global security. The 50th anniversary of the signing of the Treaty occurred in 2001. Australia invoked the Treaty for the first time in September 2001 following the terrorist attacks in the United States of America. The bilateral relationship is underpinned by a program of high-level visits and consultations. The Australian Prime Minister visited the United States of America three times in financial year 2001-02.

Australia's and the United States of America's shared strategic interests and values are complemented by dynamic trade and investment links. The United States of America is one of Australia's leading trading partners and the most important in terms of two-way services trade and investment flows. The United States of America and Australia are discussing the possibility of negotiating a bilateral free trade agreement. People-to-people ties, including educational and cultural links, are extensive and wide-ranging.

Japan

Japan is the world's second largest economy and, as such, plays a primary economic and political role in our immediate region. Australia works hard to encourage close dialogue with Japan on a wide range of economic, political and strategic issues and the development of policies which are mutually reinforcing. Japan is Australia's leading merchandise trading partner, accounting for 16% by value of our total merchandise trade in 2001-02. It is a significant investor in Australia and our second largest source of in-bound tourism behind New Zealand.

Like Australia, Japan supports the long-term strategic engagement of the United States of America in the Asia-Pacific region. Japan also shares our interest in advancing APEC as a primary vehicle for economic cooperation in the Asia-Pacific region. The Australian Prime Minister's visit to Japan in August 2001 and the Japanese Prime Minister's visit to Australia in May 2002 helped build on the strong links between the two countries. Australia and Japan have agreed to discuss deeper economic linkages, including through a possible bilateral trade and economic agreement.

China

China's importance to Australia grows along with China's increasing economic, political and strategic engagement with the Asia-Pacific region and the global economy. China's relations with the countries of the Asia-Pacific region, particularly Japan and the United States of America, play a vital role in shaping the security context for the region. Australia encourages and supports Chinese participation in organisations which promote dialogue and cooperation on regional security issues.

The 30th anniversary of the establishment of diplomatic relations between Australia and China occurred in 2002. The Australian Prime Minister visited China in May 2002. In March 2002 the Chinese Foreign Minister visited Australia, the first visit by a Chinese Foreign Minister since 1992. The Chairman of China's National People's Congress, visited Australia in September 2002.

Over the last 10 years China has moved from being the tenth to the third largest merchandise trade partner with Australia, and the trade and investment relationship is expanding. Australia and China have agreed to negotiate a framework agreement which will explore opportunities to broaden and deepen the economic relationship. New opportunities to broaden the trade and investment relationship between the two countries should also flow from China's accession to the WTO in November 2001. In August 2002 the Chinese Government awarded a major gas supply contract to an Australian consortium, the largest foreign contract ever awarded to an Australian company. Under the agreement, which is worth up to $25b, Australia will supply three million tonnes of liquid natural gas each year for 25 years beginning in 2005.

Within the parameters of the one-China policy Australia also pursues important economic and trade interests with Taiwan, our ninth largest merchandise trading partner.

Indonesia

As one of Australia's nearest neighbours, the relationship with Indonesia has long been one of our most important. The relationship is based on government-to-government links, expanding trade and investment and regional cooperation. Australia also maintains a large-scale bilateral program of economic, technical and humanitarian assistance to Indonesia.

Productive, high-level ministerial contact in recent years has helped Australia and Indonesia work together on regional challenges. The Australian Prime Minister visited Indonesia twice in 2001-02. In February 2002 the Australian and Indonesian foreign ministers jointly chaired a Regional Ministerial Conference on People Smuggling, Trafficking in Persons and Related Transnational Crime. Australia also facilitated the inaugural trilateral ministerial meeting between Indonesia, East Timor and Australia in 2002. This meeting marked an important step toward improving regional stability and security.

Indonesia is Australia's tenth largest market for merchandise exports and our eighth largest source of imports. In 2001-02, two-way merchandise trade reached its highest point.

Korean Peninsula

Relations between Australia and Republic of Korea (ROK) have become increasingly complementary and productive in recent years, reflecting a growing commonality of interests, shared emphasis on the importance of the Asia-Pacific region and mutual recognition of the benefits of close cooperation. The ROK is an important trading partner for Australia and the third largest merchandise export market. The Fourth Australia-Korea Forum, hosted by Australia in July 2002, built on the strong relationship between the two countries.

Australia has a vital interest in rapprochement on the Korean Peninsula and welcomes high-level dialogue between the ROK and the Democratic People's Republic of Korea (DPRK). Working closely with key regional partners, Australia has promoted stability in North Asia by engaging the DPRK in political dialogue and providing humanitarian assistance through multilateral organisations. Australia resumed diplomatic relations with the DPRK in May 2000 and the DPRK opened an embassy in Canberra in May 2002.

Association of South East Asian Nations (ASEAN)

ASEAN is the key regional political institution in South-East Asia and has been instrumental in promoting regional political harmony and stability for over 30 years. Australia values greatly its close relationship with ASEAN as a grouping, and with its member states (Brunei Darussalam, Burma, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand and Vietnam). Australia's relations with ASEAN cover trade and investment, as well as cooperation in the technical, cultural, defence and educational fields. Australia is also involved in the ASEAN Regional Forum, which promotes regional security dialogue and confidence building, as well as the ASEAN Post-Ministerial Conference. Australia's trade with ASEAN countries grew strongly in 2001-02, surpassing levels achieved before the financial crises hit the region in 1997.

East Timor

As the world's newest nation and close neighbour, East Timor is important to Australia. Australia worked closely with the United Nations (UN) and the East Timorese people in support of East Timor's stable transition to independence in May 2002, and continues to play a leading role in the UN post-independence mission in East Timor.

Australia established full diplomatic relations and opened an embassy on the first day of independence. The Australian Prime Minister attended the independence celebrations and the President of East Timor visited Australia in June 2002. Australia and East Timor signed the Timor Sea Treaty which provides an equitable basis for development of oil and gas resources in the Timor Sea. The Treaty will promote stability and economic development for East Timor. Australia is also one of East Timor's largest aid donors.

New Zealand

Australia and New Zealand have traditionally been natural allies and friendly rivals. Migration, trade and defence ties have helped shape the relationship. More than a million Australians and New Zealanders crossed the Tasman Sea in 2001 as tourists, for business purposes, or to visit family members. The Australia New Zealand Closer Economic Relations Trade Agreement (CER), which took effect in 1983, created a free-trade area between the two countries. New Zealand is Australia's fifth largest trading merchandise partner. At a government-to-government level, the relationship is more extensive than with any other country. The respective prime ministers hold formal talks frequently; foreign ministers have met formally twice yearly for a number of years and the trade and defence ministers meet their counterparts annually.

The South Pacific

Australia has a strong interest in the stability and economic viability of the island states of the Pacific. These countries face significant development challenges and, in some cases, political instability. Australia is the largest donor of development assistance to the South Pacific and is a major trade and investment partner for these countries. Australia supports local efforts to advance development and, where necessary, restore stability, in cooperation with other countries and institutions that have a long-term interest in the region.

Australia pursues a close, constructive and friendly bilateral relationship with PNG aimed at promoting political stability, effective governance and economic self-reliance there. Australia provided training and assistance in support of the 2002 elections. We worked quickly to engage the newly elected government and underline our commitment to support ongoing reform efforts. Australia provides civilian and defence force personnel to the multinational Peace Monitoring Group in Bougainville, which is supporting the peace process paving the way to autonomy for the province.

Australia provided substantial assistance to the Solomon Islands in the wake of unrest in 2000. Australia facilitated ceasefire and peace talks and led an International Peace Monitoring Team which supported implementation of a peace agreement. Australia is helping the Solomon Islands Government address continuing problems of lawlessness and economic decline.

In October 2001, following democratic elections in Fiji, Australia lifted bilateral sanctions introduced after the May 2000 coup and normalised the bilateral relationship.

Europe

Australia has close ties with many countries in Europe. The EU is a leading participant in key forums such as the G8 (Group of Eight), and the states of Europe make valuable contributions to leading multilateral organisations such as the UN, the WTO and the OECD. As one of the key economic centres of the world, Europe is important to Australia's trading interests. The EU as a common market is Australia's most significant trading partner and the largest foreign investor in Australia.

In 2001-02 the United Kingdom was Australia's sixth largest merchandise trading partner. It is also the second largest single country investor in Australia and the second largest destination for outward investment from Australia.

The key central and eastern European markets for Australia are Russia, Poland, Hungary, the Czech Republic and Romania, while the smaller transition economies - Slovenia, the Slovak Republic and Bulgaria - also offer trade opportunities for Australia. Australia's relations with these and other regional countries have developed rapidly in recent years, and will continue to do so as many of them prepare to become members of the EU.

South Asia

India is growing in strategic and economic importance in global and regional affairs and is an increasingly important dialogue partner for Australia. During 2002 heightened tensions between India and Pakistan threatened peace and stability in the region. Australia contributed to international diplomatic efforts to lower tensions between the two countries.

Australia restored defence ties with Pakistan, which had been suspended following that country's 1998 nuclear tests, in recognition of its constructive role in the international campaign against terrorism. Australia participated in the US-led international intervention in Afghanistan against the Taliban regime and the associated Al Qaida terrorist network. In 2002 Australia re-accredited a non-resident ambassador to Kabul, and Afghanistan established its first resident embassy in Canberra. Australia pledged $50.7m in aid to Afghanistan, our second largest contribution to an international humanitarian relief effort.

Canada and Latin America

Australia's relationship with Canada is mature, productive and broadly based. The two countries have been trading for more than 100 years and established formal diplomatic links 60 years ago. In addition to the active trade and investment relationship, Australia and Canada cooperate closely on international security, trade and environmental issues.

Trade and investment relations between Australia and the countries of Latin America have expanded in recent years. The size and diversity of the markets in the region offer significant opportunities for Australian exporters and investors. The Australian Government also pursues a productive relationship with Latin American countries on a range of international political and economic issues.

The Middle East and Africa

Australia has growing commercial interests in the Middle East, a significant destination for Australian agriculture, services and manufactured exports. The Middle East has been the fastest growing regional market for Australian exports over the past decade. Australia's most significant relationship in Africa is with South Africa, which is a growing market for Australia's commercial interests and provides a base for trade with all the countries of the Southern African Development Community.